"Prices are inelastic downwards": Former Lebanese PM warns Hormuz reopening won't provide instant economic relief
By Ayushi Agarwal, Beirut, June 17
As the international community prepares for the formal signing of the US-Iran peace deal this Friday, former Lebanese Prime Minister Fouad Siniora has cautioned that the reopening of the Strait of Hormuz, while a necessary diplomatic victory, will not serve as an immediate "reset button" for the global economy.
Speaking to ANI, Siniora emphasised that the inflationary shock caused by the closure of this vital maritime chokepoint has already become baked into global markets.
Siniora, drawing on his extensive background in finance and governance, argued that energy prices are unlikely to retreat to their pre-crisis baselines, regardless of how quickly tankers begin moving through the waterway.
"Even if the Hormuz straits are opened immediately now... there are certain economic facts of life that prices are inelastic downwards," Siniora stated. "So they are not going to drop immediately, and not necessarily to the levels before the closure of the Hormuz straits."
He noted that the crisis has already "pushed inflation to unprecedented levels," warning that the global economy will continue to grapple with the aftershocks of the disruption for the foreseeable future.
Reflecting on the recent G7 Summit in Évian-les-Bains, Siniora highlighted a critical shift in geopolitical thinking. He observed that both European and American leaders appear to be reaching a new consensus that addressing systemic threats, from the volatility in West Asia to the ongoing war in Ukraine, requires a unified front.
"One of the things that we have to conclude out of the meeting that was held two days ago in France by the G7. Again there is a realization among the Europeans and the Americans that they have to really settle down their differences among the Europeans and the Americans that they have to really settle down their differences," he said.
According to Siniora, the United States and Europe must cooperate in "finding a solution first of all in dealing with the matter of the Hormuz straits" and determine what role international and European forces can play in ensuring security in the vital maritime corridor.
While describing recent diplomatic developments as encouraging, he cautioned that progress remains fragile and requires sustained follow-up. "There are certain good results up till now, but [they have] to be followed and pursued so that something really fruitful can come out of this," he said.
Siniora also argued that some actors in the region are not supportive of the emerging understanding. He claimed Israeli Prime Minister Benjamin Netanyahu is unhappy with the agreement, while certain centres of power within Iran are also resistant to compromise and reluctant to make concessions.
Expressing cautious optimism, Siniora said the agreement could still pave the way for broader regional stability if backed by serious diplomatic efforts. "The matters in the Middle East can no longer be dealt with using ointments. It needs a real solution. Half solutions are not solutions," he said.
— ANI
Reader Comments
Good that they're finally talking about a unified approach. The G7 realising they need to settle differences is long overdue. But honestly, this whole crisis shows how dependent the world is on a single chokepoint. India needs to fast-track our strategic petroleum reserves and diversify our energy sources. Relying on West Asia for 80% of our oil is a ticking time bomb.
As someone who follows global trade, this is a sobering analysis. The supply chain disruptions from the Hormuz closure have already created new pricing baselines across industries. It's not just oil - think petrochemicals, plastics, fertilisers. Indian farmers are already feeling it with higher input costs. We need a Ministerial-level task force to assess the ripple effects on our domestic economy.
Siniora's point about half solutions is spot on. The Middle East needs a comprehensive settlement, not just patchwork agreements. Netanyahu opposing this deal is no surprise - he has always prioritised conflict over stability. But I'm cautiously optimistic that if the US and Europe stay united, they can force a real resolution. India has a stake here too, given our diaspora and energy needs.
Respectfully, while Siniora makes valid economic points, I think he's underestimating the psychological impact of the reopening. Markets run on sentiment as much as fundamentals. Once tankers start moving, even if prices don't drop immediately, the fear premium will reduce. That alone can stabilise inflation expectations. India's RBI should still keep a hawkish stance though.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.